ABSTRACT
We have examined the effects of expansionary monetary and fiscal policies (changes in aggregate expenditure) on macroeconomic equilibrium. In addition to such policies there is another set of policies that is often available to the policy makers. This set is called the set of expenditure switching policies. Such policies include exchange rate adjustment (devaluation or revaluation), import controls, tariffs and the like. We saw in Chapter 5 that, in a flexible exchange rate regime, expansionary monetary and fiscal policies had implications for exchange rate adjustment.
